All-American Term Trust Inc.-- Quarterly Commentary.

NEW YORK--(BUSINESS WIRE)--Nov. 22, 1999--

All-American Term Trust Inc. (NYSE: AAT) is a closed-end management investment company with an investment objective of providing a high level of current income, consistent with the preservation of capital.

Commentary

Bond prices ended the third quarter slightly lower as Treasury yields edged up by about 0.09%. The 30-year Treasury bond generally yielded 6.0-6.1%, although it briefly reached 6.28%--its post-1996 high--in August.

Sector spreads (the difference in yield or income that securities must pay to compensate for the additional risk) over Treasurys continued to widen to levels seen during last fall's global crisis, mainly due to heavy issuance as treasurers rushed to get their fourth-quarter financing done ahead of potential Y2K problems. In contrast, the current environment reflects an improving global economy.

Corporate bonds underperformed during the third quarter as the spread widening that occurred in July and August was not fully reversed in September. This is the second consecutive quarter that corporate bonds have been under pressure, although there were signs of strength towards quarter-end: dealer inventories are light; supply has slowed significantly; and investors are sitting on cash to be invested.

High-grade, broker/dealer bond spreads tightened as earnings came in at healthy levels. Spreads in the high-grade, cable/media sector widened slightly as the market became concerned that some of the rumored merger and acquisition activity would be debt-financed. This led to some widening in Trust holding News America, which we viewed as an overreaction, but has since tightened and still appears cheap for its ratings.

Portfolio Positioning

The Trust's duration (a measure of a bond fund's sensitivity to interest rates) is constrained at about three years since the Trust will terminate on or about January 31, 2003. On the high-grade side, the Trust reduced its position in TCI (Telecommunications Inc.) as further spread tightening appears limited for this issuer. We increased the Trust's financial services sector by adding Capital One, a BBB-rated credit card issuer, and its energy sector by purchasing Osprey Trust, a statutory business trust sponsored by Enron Corp.

Outlook

Improving corporate profits and strong economic data with contained inflation bode well for the high-grade corporate sector. In addition, with the backup in Treasury yields and the widening in spreads, many investment-grade credits can be purchased at or above 8%, a hurdle rate for many cash flow investors. High-grade corporate issuance continues to be modest and we anticipate that as year-end approaches, Y2K uncertainties should keep the capital markets quiet.

This commentary reflects our views at the time of its writing. These views may change in response to changing circumstances.